Some businesses reimburse your mileage or gas when you use your car to conduct business. The IRS sets the mileage rate on an annual basis, and most companies use this as the guideline for reimbursement. Car expenses when used to conduct business, paid by employers or employees are tax deductible as business expenses under IRS law. But if the employer doesn't reimburse the business use of your car, you can take the deduction on your taxes instead.

Business Expenses

Under IRS laws, employees who don't get reimbursed for business use of their car have two options available to them as tax deductions -- using the actual expense method or the standard mileage rate. To use the first method, you must divide the business use of your car from your personal use to determine how much you can deduct on your taxes. The actual expense method can include gas, oil, insurance, lease payments, garage rents, parking fees and bridge tolls, repairs, maintenance and tire replacements. When you use the mileage method, keep mileage logs of business miles in your vehicle as proof of your expense. The actual expense method requires you to keep receipts of your car expenses.

Expense Reports

Follow a company's in-house policies and procedures for submitting business expenses for use of your car. This may include submitting an expense report within at least 60 days of the expense. The policy includes the manner in which employees submit their expenses, who approves expenses, spending limits and other pertinent information that could apply to travel expenses, such as hotels, meals, airfare, taxi or other transportation costs -- such as mileage to and from the airport. The procedures outline needed receipts or mileage logs of the actual miles traveled, which can include mileage readings from the odometer or speedometer from your car.

Payments and Recordkeeping

Keep records of any payments received for business use of your car for your personal records. Also keep all receipts, mileage logs and other backup information that supports the tax deduction you take on your annual tax report to the government if you use this method. If a dispute ever arises with the IRS, you will need physical proof of the business use of your car. If you do not keep paper records, scan expense forms and receipts into a scanning system and save them on a disk. Make it a habit to keep these records for up to seven years as backup for your tax returns.

Other Options for Car Expenses

Some companies elect to give some employees a car allowance. When providing employee car allowances businesses have two methods of accounting under IRS rules: accountable plans and nonaccountable plans. Accountable plans must include an internal policy for business expense reimbursements within 60 days of the expense, with payback of any unused advances or money due the company within 120 days of the expense. The company cannot include these items as taxable items on an employee's paycheck under IRS accountable plan rules. Under nonaccountable plans, the employer must report the car allowance as pay.